Workers Compensation: The costs of non-compliance

Why is it so important to ensure you have a current Workers Compensation Policy in Western Australia? If you don’t, it could cost you a lot more than your think!



Under the Workers Compensation and Injury Management Act 1981, having a current Workers Compensation policy in Western Australia is a legal requirement for any individual, partnership, trust or legal entity that employs workers. This also extends to include those that, although would otherwise be viewed as contractors by the ATO, could in fact be deemed workers under the Act.


Neglecting, ignoring or avoiding your responsibilities could cost you dearly, if you are found not to be holding a current policy when you should. Even more so, if it is discovered following the injury to and subsequent claim by a deemed worker, that there has been a failure to hold cover.


The costs for failure to provide cover are substantial and could include:

  • in excess of $600,000 in benefits if a worker is injured

  • legal costs involved in court action

  • liability for the cost of any action taken at common law

  • fines of up to $5000 per worker

  • an amount equal to any avoided premiums going back five years

  • separate and further offences for every week you remain uninsured after the date of conviction.


The same goes for any agreement, where you are engaging in any avoidance arrangement. Whether written or verbal, where you enter in to an arrangement with someone who would otherwise be deemed a worker, and this leads to them be removed or excluded from cover, you would be engaging in an avoidance arrangement. Regardless of your intention to enter in to an agreement, with either the objective being to deliberately avoid your responsibilities or not, you can be found to be in avoidance. This could include situations where you deem a worker as a contractor only who is responsible for their own insurances and costs, or where you force a previously employed worker to become a Pty Ltd company in order to undertake future work for you.


Again, there are substantial fines and penalties for being found to be in avoidance and these could include:

  • the employer being liable to pay workers’ compensation entitlements in accordance with the Act and meet return to work obligations if a worker is injured while working for an employer under an avoidance arrangement

  • a fine of $5000 for employers who allow workers to do work for them under an avoidance arrangement

  • a $2000 penalty may be applied to employers (or insurers) who receive money or indemnity from a worker (or the worker’s company) in respect of any compensation liability the employer has to pay.


As part of their investigations, WorkCover WA could also decide to prosecute you for any breaches of non-compliance of your obligations under the Act. Judgments against you can include the costs of any Fine, Legal Costs and an Avoided Premium Order, which is for the premiums you would otherwise have paid if you had met your obligations. Calendar year records are published of all prosecution results as an example to all employers of the potential costs associated with a breach. You can find these results by clicking here, which will take you to the WorkCover WA site.


At Proactive, we help you to understand exactly what your obligations are, so that you know you are meeting them correctly. This includes reviewing your employment arrangements and any engagement contracts you have with any contractors. That way we can let you know if you need to cover them under your policy and, more importantly, how to do this the right way.


So if you require cover or would like to review your current arrangements, to ensure that you are meeting your obligations under the Act, contact us today and we can help you avoid what could cost you more than you think.


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#WorkersCompensation #Legal #WorkCover

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